HDFC Life Insurance Co. – Q2FY25 Results by Manish Chowdhury, Head of Research, StoxBox

HDFC Life Insurance Co. Ltd. H1FY25 First Cut – Strong new business growth; VoNB margin remains a concern

– The individual annual premium equivalent (APE) during H1FY25 recorded a growth of 31% YoY to Rs 5,864 crores, while the total APE rose 25% YoY to Rs. 6,724 crores. The topline growth can be attributed to a rise in the number of policies sold and a balanced product mix.
– Profit after Tax rose to Rs. 911 crores in H1FY25, up 15% YoY.
– Assets Under Management (AUM) increased to Rs. 3,24,942 crores in H1FY25, up from Rs. 2,64,870 crores in H1FY24, representing a 23% YoY growth.
– The Value of New Business (VoNB) for H1FY25 amounted to Rs. 1,656 crores, marking a 17% YoY growth.
– The New Business Margin for H1FY25 was 24.6%, compared to 26.2% in H1FY24.
– Private sector market share (individual WRP) expanded to 16.3%, up 60 bps YoY. The overall market share reached a new high of 11%.
– Strong growth in 13-month and 61-month persistency (based on premium considering Regular Premium/ Limited Premium payment under individual category) in Q2FY25 which rose by 120 bps and 730 bps to 88% and 60%, respectively, due to its focus on improving the quality of business.
– The solvency ratio stood at 181% as of Q2FY25, compared to 194% in Q2FY24, indicating the company maintained a stable financial position.

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HDFC Life Insurance reported a mixed performance for the period, with a 17% growth in the Value of New Business (VoNB) supported by strong new business premiums. However, the VoNB margin showed weakness, declining by 200 bps YoY. With new policy surrender guidelines coming into effect from October 1st, we anticipate further contraction in VoNB margins over the coming quarters. We will closely monitor the management’s strategy on pricing and how they plan to adopt a prudent approach to mitigate this risk. Further, the company said that it has successfully relaunched more than 40 top products contributing about 95% of the business, in-line with revised regulations and plans to relaunch other products in the coming quarters. Hence, we believe that the company plans to keep its product mix balanced going ahead so that there is no major impact of the regulation change on a particular product. A key monitorable going forward would be the sustenance of VNB margin.

Manish Chowdhury, Head of Research, StoxBox